Indonesian buyers of prime property in the island state are on the rise despite the poor market environment.

The Lion City may be experiencing one of the worst property slumps in its history, and while interest for luxury properties there may be waning among some foreign investors, wealthy Indonesians are surprisingly on a buying spree.

According to Bloomberg, purchases of homes valued in access of S$5 million (RM15.1 million) by Indonesian nationals have quadrupled over the past year. This is particularly strange when investments
from traditional investors such as China and Malaysia have been on the decline.

However, some property analysts in the country note that the heightened buying by Indonesians is not so much a mystery when you consider that it coincides with the passage of a law in Jakarta aimed at getting Indonesians to repatriate or pay taxes on an estimated US$300 billion (RM1.2 trillion). Much of this amount, in fact, fled to
Singapore during previous periods of unrest in Indonesia.

“We’re seeing a big increase in Indonesians buying the most expensive properties,” said a senior agent of a property firm in Singapore.

He said the basic premise is, “if I don’t want people back home to know what I have here, I’m going to hide it in property”.

Among other Southeast Asian nations, Indonesia and Singapore are adopting global tax reporting requirements to tell each other about nationals holding assets abroad.

Indonesians moving money into property are counting on only assets held in banks, not in real estate, being shared, agents and brokers say.

While the numbers are currently small, the trending surge is evident. Indonesians bought 30 Singapore properties valued at S$5 million (RM15.1 million) or more between the start of the year and August 17, compared with only
eight such deals for all of 2015, according to the Urban Redevelopment Authority. It is also important to note that in Singapore, disclosure of nationality is voluntary.

Cushman & Wakefield Inc reports that during the first half of this year, Indonesians bought 189 properties of all values in Singapore, 23 per cent more than in the same period last year. Purchases by Chinese and Malaysians declined during the second quarter, while transactions by Indonesians rose 19 per cent.

However, it is also fair to say that not all Indonesians buying real estate are seeking to avoid taxes. There is also rising wealth among its citizens and many may see value in a market that bottomed out in prime areas at the end of 2015.

“Indonesians also see Singapore as a politically stable and safe haven. This is an important factor, especially at this time when you see so much instability in the region,” said global market strategist for JPMorgan Chase
& Co Jasslyn Yeo.